Tuesday, June 4, 2013

Automatic Car Wash Case Study - Phoenix Depressed Crime Ridden City Location on Major Street

Not long ago, I was discussing some of the challenges of setting up a completely automatic car wash system to run remotely in a depressed suburban area of Phoenix, adjacent a rather nice gated retirement communicate (enclosed mini-city). Now then, there is no real commercial property available inside the gates of the retirement resort community, so, the only place to put such a car wash would be nearby where there is available land. Luckily, there is available land and relatively inexpensive which is necessary for a proper ROI. Okay so, let's talk about this scenario for a moment, is it a wise choice or business to go into?

Well, in this particular case study, the potential entrepreneur wants to build a business with a good solid cash flow and put an all automated car wash on a busy street in the area adjacent. It turns out that I do know the area well. But alas, I asked the entrepreneur; isn't there some crime around there, the neighborhood seemed somewhat sketchy last time I was through, as if the little area there survived the time-warp, real estate run-up, and the severe collapse now. Didn't they catch a terrorist or two near you too? What about drug gangs, etc. Don't you have some crime there?

It turns out they do have significant crime there, but he was unaware of this fact. The property now has a small house on it, so I asked; is it zoned to run a business there? Are you in the county or city where you are? Can you get a second on the house to finance the upgrades or would you "start small and finish big" in this case? Unfortunately, he explained that the property alone isn't worth enough to get a second on once the house is torn down. But the city has re-zones the area for light industrial, retail, and auto services - perfect.

Since the area is somewhat depressed there is a good labor supply there available, and the property is a nice corner spot on two main cross streets. Another challenge is the city has some sewer treatment challenges in their past history which could also be a factor. Also with the city upgrades there could be diminished land due to sidewalks and turn lanes, so the acreage which is now one-quarter acre could be cut further limiting space, that could be a problem too you see.

Now then, my point in this case study is that just because you think that an automated car wash is a good cash flow business doesn't mean it can't get you into hot water trying to navigate turbulent waters, government bureaucracy, and/or unforeseen challenges. Even the best small business world in the world comes with risks. Please consider all this before starting a car wash business of your own.

No comments:

Post a Comment